Insider Trading Kickoff: Feds Arrest Expert-Network Employee Don Chu

The U.S. Attorney in Manhattan today announced the arrest of Don Ching Trang Chu, seemingly starting the next phase of the massive government investigation into insider trading.

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Chu, an employee at an “expert network” firm, has been charged with “conspiring to promote the firm’s consultation services by arranging for insiders at publicly-traded companies to provide material, nonpublic information to the firm’s hedge fund clients for the purpose of executing profitable securities transactions,” according to a press release this morning.

We’ll have more as it comes in. UPDATE: Our Journal colleagues reported Chu has been listed as an Asia expert for Primary Global Research, identified earlier as one of the web of firms whose consultants are under investigation by federal officials.

The feds said Chu was scheduled to leave for Taiwan early next week. The 56-year-old resident of Somerset, N.J., has been charged with one count of conspiracy to commit securities fraud and one count of conspiracy to commit wire fraud and fraud in connection with securities.

The government says Chu’s job was to arrange for consultants for his firm –- which wasn’t named -– to provide inside information about earnings at public companies.

The charges say Chu around late 2008 established ties with Richard Choo-Beng (C.B.) Lee, who then worked for a hedge fund that called consultants to snag inside information about public-company earnings. The government said Lee began cooperating with the government’s investigation.

One of the companies the government said was involved in Chu and Lee’s interactions was Broadcom. According to the government’s news release, Chu told the FBI agents that the Broadcom employee “probably gave [a certain hedge fund manager] Broadcom’s revenue numbers before Broadcom’s quarter end because that is what [the Broadcom employee] does.”

Need to find person/persons in hedge funds who receive this insider information and then work it into the Hedge Fund Business Model for pushing profits at expense of other investors who cannot get such info in a timely manner. Need to go after individuals in corporations because under current enforcement procedures the corporation ends up being guilty, but not pleading guilty and the fine/punishment is imposed on shareholders through agreements. The guilty continue to work. Perhaps people doing the dirty work in our funds/corporations would not be so eager to participate if they would be also charged for illegal actions.

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